Lecture 7 Business Organization

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Lecture 8 Business Organization

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Business OrganisationsBusiness organisations include the sole proprietorship(sole trader), the partnership and the company. There are advantages and disadvantages associated with these different forms. The most important distinction is that, where persons choose to register a company, the company is a juridic or artificial legal person which, with certain obvious exceptions, has the same rights and liability under the law as a natural person. There is no creation of a separate legal person in the case of the sole trader or the partnership. The main consequence is that the registered company provides the protection of limited liability for its memebers.

1 sole proprietorships

2 partnerships 3 company

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Sole proprietorship1. definition A person doing business for himself or herself is a sole proprietor; the business organization is a sole proprietorship. The sole proprietorship is the oldest and simplest form of business organization. As a proprietor, a person may simply begin to do business without formality in enterprises that do not require a government license or permit. The proprietor generally owns all or most of the business property and is responsible for the control, liabilities, and management of the business. In a sole proprietorship, legally and practically the owner runs the business, and capital must come from the owner’s own resources or from borrowed resources. The greatest disadvantage of the sole proprietorship is the limited alternatives for raising capital and the proprietor usually bears unlimited responsibility to the enterprise’s debt.

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2. characteristics a. sole proprietorship is set up by one person; b. the assets of proprietorship belongs to the investor; c. the investor bears unlimited liability to the proprietorship’s liability; d. the proprietorship is not a legal person. 3. merits a. it does not need large amount of capital; b. it enjoys tax benefit; c. it’s easy to organize and inexpensive to operate 4. demerits a. it’s very difficult to raise capital; b. the investor bears unlimited liability; c. the business scale is small.

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Partnerships

1. definition A partnership is defined as an association of two or more persons to carry on a business as co-owners for a profit. The partners or general partners share control over the business’s operations and profits. Many attorneys, doctors, accountants, and retail stores are organized as general partnerships. A partnership can begin with an oral agreement between two or more persons to do business as partners or with an implied agreement that may be inferred from the conduct of the partners as they do business together. The partnership agreement usually specifies such matters as the business name, ownership interests of the partners, partners’ responsibilities, method of accounting, duration of the partnership, and procedures f

or the partnership’s dissolution.

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2. characteristics a. the admission of new partner needs unanimous consent b. partners are liable for the partnership’s obligation. c. partners bear joint and separate liability. 3. merits a. easy to organize and inexpensive to operate b. enjoys tax benefits c. keeps commercial secrete private 4. demerits a. partners do not enjoy limited liability b. a partner’ retirement, bankruptcy, withdraw or death may cause the partnership to dissolve

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Categories of PartnershipGenral Partnership An association of two or more persons who co-own and manage a business and who are each liable to the full extent of their personal assets for its debts.

Limited partnership An association of two or more persons, at least one of whom has unlimited personal liability for the debts of the business and at least one other who is an investor having limiteed liability.

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Corporations

1. definition A corporation is owned by shareholders who elect a board of directors to manage the business. Shareholders have limited liability for the obligations of the corporation. 2. characteristics a. Owner’s liability: the shareholders enjoy the limited liability; b. Existence: The existence of the corporation is independent from the change of the shareholders. c.Legal Status: a corporation is a legal person and a legal entity independent of its owners (shareholders) and its managers (officers and board of directors);

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d. Management: the management of the corporation is vested in the board of directors; e. Transferability of owner’s interest: the shares may be sold or transferred to a third person without the approval of the corporation. f. Taxation: a corporation pays income taxes on its income. A shareholder would have personal income from the corporation when the corporation pays him a dividend. And the shareholders pay tax on the dividends.

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3. meritsa. the investor enjoys limited liability b. the business is managed by professional managers c. the shareholders can easily exit the corporation by transferring the shares d. it can easily get money from the bank or securities market

4. demerits a. tax disadvantage b. more expensive to operate c. complex structure

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Categories of Company

Civil Law Stock corporation A corporation that can raise money in the public marketplace through the sale of freely transferable shares. Limited liability company A corporation owned by members that does not issue negotiable share certificates and is subject to minimal public disclosure laws.

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Categories of CompanyCommon Law Public Corporation A corporation that can raise money in the pu …… 此处隐藏：4364字，全部文档内容请下载后查看。喜欢就下载吧 ……